AICHI CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

The significant increases in ordinary income and net income were characterized by a high degree of dependence on non-recurring items, such as non-operating income and extraordinary gains, while improvement in the profitability of the core business remained modest. Revenue was ¥9.89B (up +7.4% YoY), operating income was ¥0.32B (up +10.0%), ordinary income was ¥0.68B (up +25.9%), and net income was ¥0.62B (up +102.2%). The primary factors behind the sharp increase in net income were extraordinary gains of ¥0.28B, including a gain on the sale of investment securities of ¥0.27B, and the recognition of ¥0.24B in equity in earnings of affiliates. Although the gross profit margin declined to 16.5% (18.6% in the previous year) due to an increase in the cost-of-sales ratio, the SG&A ratio improved to 13.3% (15.3% in the previous year), enabling the operating margin to remain nearly flat at 3.3% (3.2% in the previous year).

Factors Affecting Performance

【Revenue】Revenue was ¥9.89B, representing a +7.4% YoY increase. By segment, the core Special-Purpose Vehicles Business generated ¥6.85B (66.2% of total revenue, YoY +3.8%), Parts and Repair generated ¥3.23B (31.2%, YoY +9.6%), and Other generated ¥0.26B (2.5%, YoY +76.9%). Parts and Repair and the Other Business, both related to the aftermarket, drove growth.

【Profit and Loss】Operating income was ¥0.32B (YoY +10.0%). While the gross profit margin declined by approximately 2.1pt to 16.5% (18.6% in the previous year), the SG&A ratio improved by approximately 2.1pt to 13.3% (15.3% in the previous year), resulting in an operating margin of 3.3%, which was essentially flat. Ordinary income increased significantly to ¥0.68B (YoY +25.9%), driven by ¥0.36B in non-operating income, including ¥0.24B in equity in earnings of affiliates and ¥0.07B in dividend income. Net income was ¥0.62B (YoY +102.2%), supported by extraordinary gains of ¥0.28B, including a gain on the sale of investment securities of ¥0.27B; the effective tax rate was 34.7%. Revenue, operating income, ordinary income, and net income all exceeded the previous year, resulting in higher revenue and profit at every level. However, growth in ordinary income and net income was highly dependent on non-recurring items.

Segment Analysis

Parts and Repair made the largest contribution to operating income, generating operating income of ¥1.18B (YoY +12.8%) while maintaining a high margin of 36.6%. The core Special-Purpose Vehicles Business posted higher revenue of ¥6.85B (YoY +3.8%), but operating income declined to ¥0.40B (YoY -37.9%), with its margin falling to 5.8%, apparently due to higher costs and changes in the product mix. The Other Business grew, albeit from a small base, with revenue of ¥0.26B (YoY +76.9%), operating income of ¥0.07B (YoY +129.3%), and a margin of 27.5%. Consolidated operating income is structured such that deteriorating profitability in Special-Purpose Vehicles is offset by increased profits in Parts and Repair and Other.

Key Financial Indicators

【Profitability】The operating margin was 3.3%, essentially flat versus 3.2% in the previous year. The ordinary income margin increased to 6.9% (5.9% in the previous year), and the net profit margin increased to 6.3% (3.3% in the previous year). 【Cash Flow Quality】Operating cash flow was ¥4.02B, approximately 6.5 times net income of ¥0.62B, indicating strong cash backing for earnings. 【Investment Efficiency】ROE was 0.8%; the low total asset turnover ratio was a factor weighing on ROE despite the increase in the net profit margin. 【Financial Soundness】The equity ratio increased to 87.3% (81.2% in the previous year). Current assets of ¥46.29B versus current liabilities of ¥7.94B indicate ample liquidity, and the financial foundation is extremely stable.

Cash Flow Analysis

Operating cash flow was ¥4.02B, a significant increase from ¥0.22B in the previous year, primarily due to progress in the collection of trade receivables, which contributed to a ¥8.31B increase in cash. Conversely, a decrease in trade payables (-¥3.51B) and corporate income tax payments (-¥1.88B) were sources of cash outflow. Investing cash flow was -¥1.38B, primarily reflecting ¥1.70B in acquisitions of property, plant and equipment. Financing cash flow was -¥1.95B, mainly due to dividend payments of ¥1.94B, while share repurchases remained minimal. Free cash flow was ¥2.64B, indicating that dividends and capital expenditures were funded within the range of operating cash flow.

Earnings Quality

Recurring sources of earnings consist of product sales and aftermarket services in the Special-Purpose Vehicles and Parts and Repair Businesses, supplemented by ¥0.36B in non-operating income (¥0.24B in equity in earnings of affiliates and ¥0.07B in dividend income). Extraordinary gains of ¥0.28B consisted primarily of a ¥0.27B gain on the sale of investment securities. This was a temporary factor and accounted for approximately 44% of net income of ¥0.62B. Operating cash flow was approximately 6.5 times net income. Thus, earnings quality is high in terms of cash-flow backing; however, the fact that much of the growth in ordinary income and net income depended on non-recurring items, such as equity in earnings of affiliates and extraordinary gains, warrants attention when assessing earnings sustainability.

Performance Forecast and Guidance

Q1 progress against the full-year forecast was 15.7% for revenue (¥9.89B/¥63.00B), 4.1% for operating income (¥0.32B/¥7.90B), 8.0% for ordinary income (¥0.68B/¥8.50B), and 9.3% for net income (¥0.62B/¥6.70B). Compared with simple progress of 25% for the quarter, all levels were below pace, particularly operating income. No revisions were made to the performance or dividend forecasts during the quarter, and management maintained its plan weighted toward the second half.

Shareholder Returns

The full-year dividend forecast is ¥33, and based on average shares outstanding during the period of 64.559M shares, total annual dividends are expected to be approximately ¥2.13B. The payout ratio against the company’s forecast net income of ¥6.70B is approximately 31.8%, and no revision was made to the dividend forecast during the quarter. Dividends paid during Q1 were ¥1.94B, fully covered by operating cash flow of ¥4.02B and free cash flow of ¥2.64B. Share repurchases during the quarter remained minimal (¥0.00B).

Risk Factors

1. Deteriorating profitability in the Special-Purpose Vehicles segment: The core Special-Purpose Vehicles Business, which accounts for 66.2% of revenue, saw operating income decline to ¥0.40B (YoY -37.9%) and its margin fall to 5.8%. The impact of higher costs and changes in product mix on consolidated earnings needs to be monitored.

2. Increase in inventories: Inventories were ¥2.59B, up +46.9% from ¥1.76B in the previous year. Consistency with the demand outlook and inventory turnover efficiency should be reviewed.

3. Dependence of earnings quality on non-recurring items: Extraordinary gains of ¥0.28B, primarily consisting of a ¥0.27B gain on the sale of investment securities, accounted for approximately 44% of net income of ¥0.62B. It is necessary to assess the underlying earnings power excluding such non-recurring items.

Industry Benchmark (Reference—Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Return

The company’s operating margin is significantly below the industry median, placing its profitability in the lower tier of the industry.

Growth and Capital Efficiency

The revenue growth rate is slightly above the industry median, placing the pace of revenue growth at a standard level within the industry.

※Source: Company compilation

Key Points from the Earnings Results

1. The Parts and Repair segment maintained a high margin of 36.6%, creating an earnings structure that offsets the deteriorating profitability of the core Special-Purpose Vehicles segment (margin of 5.8%). Diversification of earnings sources within the portfolio is observed as a factor supporting consolidated earnings.

2. The significant increases in ordinary income and net income (YoY +25.9% and +102.2%, respectively) were highly dependent on non-recurring items such as equity in earnings of affiliates and gains on the sale of investment securities. Operating income, which reflects the profitability of the core business, increased only YoY +10.0%; the divergence between the two growth rates is an important point in assessing earnings quality.

3. Q1 operating income progress against the full-year forecast was 4.1%, significantly below simple progress of 25%. To achieve the plan weighted toward the second half, recovery in the gross margin and improvement in the profitability of the Special-Purpose Vehicles segment should be monitored.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson type, explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,122–¥1,187 at cost of equity ±1%; ¥1,154–¥1,154 at ω±0.1.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference versus the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, and you should consult a professional as necessary.

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